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Franklin Financial sees big 2015 while merger costs hit other community banks

Earnings season is in full swing for end-of-year and fourth-quarter figures, with some local community banks reporting earnings recently:

Metro Bancorp Inc.

In what is likely its last earnings report, the Swatara Township-based holding company for Metro Bank announced its fourth-quarter and full-year net income, which included merger-related expenses.

The company announced $5.5 million in net income, down from $5.6 million for the fourth quarter of 2014. Adjusted net income, however, absent the $414,000 in pre-tax merger expenses for the quarter, was about $5.9 million.

For the year, the company reported $20.2 million in net income, or $1.40 per diluted net income for each common share of stock. That was down 4 percent from the $21.1 million, or $1.46 per diluted share, in net income for 2015.

Without the $2.1 million the company recorded in merger-related expenses for 2015, adjusted net income was $23.9 million, or $1.65 per diluted share.

The merger-related costs stem from the company’s planned $474 million sale to F.N.B. Corp., the parent company of First National Bank of Pennsylvania.

The acquisition is expected to close Feb. 12. Pittsburgh-based F.N.B. announced last week in its earnings report it had spent nearly $2.9 million on the merger in 2015.

While Metro briefly crossed the $3 billion mark for assets after the company’s second quarter of 2015, it was down to about $2.9 billion in assets at the end of the year.

Codorus Valley Bancorp Inc.

The holding company for PeoplesBank also saw its 2015 earnings fall, mostly because of new expenses.

The York Township company reported $11 million in net income, or $1.75 per diluted share, for 2015. In 2014, it reported $11.6 million in net income, or $1.93 per diluted share.

The company accrued $37.4 million in noninterest expense in 2015 against $32.5 million in 2014.

Codorus Valley Chairman, President and CEO Larry J. Miller, who plans to retire as the bank’s president and CEO in March, said the approximately 15 percent increase in noninterest expense came from costs of adding personnel, back-office facilities and new financial centers.

In 2015, the company added four locations with its acquisition of Madison Bancorp Inc. in Maryland, adding expenses related to leases, equipment and new employees to the payroll.

The company also increased its loan loss provision from $1.6 million in 2014 to $3.5 million in 2015. According to the bank’s earnings report, total loans jumped more than 22 percent to $1.1 billion at the end of 2015. The bank’s analysis of its growing loan portfolio concluded an additional loan loss provision would be necessary, according to the earnings report.

Codorus Valley trades on the NASDAQ exchange at the ticker symbol CVLY and has assets of about $1.4 billion.

Franklin Financial Services Inc.

The Chambersburg holding company for F&M Trust Co. took a big leap in 2015, reporting more than a 21 percent growth in net income.

The company reported net income of $10.2 million, or $2.40 per diluted share. In 2015, the company was at $8.4 million in net income for 2014, or $2 per diluted share.

The company, however, reported that two major, one-time gains bumped up yearly earnings.

The first was an $899,000 pre-tax credit that came from two investments. One was $728,000 it received from its initial investment in Integrity Bancshares Inc., which was sold to S&T Bank of Indiana, Pa., in March. Its initial investment was $110,000.

The second investment gain was $171,000 from the liquidation of BankersRe Insurance Group SPC, a Cayman Islands insurance company in which Franklin Financial held an ownership interest.

The company also scored a $250,000 reduction in income taxes in 2015.

Not taking into account the one-time gains, Franklin Financial was at almost $9.4 million in adjusted net income for 2015, a growth in net income of about 11.4 percent versus 2014.

The company has more than $1 billion in assets and trades on the OTC Exchange at the ticker symbol FRAF.

Michael Sadowski

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